When choosing a condo, you have more options than just new, under-construction units, or resale units. You may also find new condos that have received their Temporary Occupation Permit (TOP). This could potentially combine the best of both worlds as it’s still a new home, and you don’t have to wait for it to be completed.
Here are some of the factors to consider, when choosing between an under-construction condo, and a recently completed (TOP) condo:
They key differences between under-construction and new TOP condo units
• TOP units are already completed, so there’s less delay in moving in
• There is no risk of construction delays, or failure to complete
• Sometimes you can view the actual unit, instead of just seeing a showflat
• You have the chance to use a Deferred Payment Scheme (if the CSC is also issued)
• You generally lose the discount from earlier launch phases / VIP previews
• You may not be left with the choicest units, if you buy this late
1. TOP units are already completed, so there’s less delay in moving in
This is probably the biggest draw of buying a new TOP unit: you can move in shortly after the purchase, or you can start taking on tenants.
For new launch condos that are under construction, you will typically have to wait around two years before you can move in, or rent it out.
Otherwise, the only other way to have a property ready to move into is by purchasing an older resale condo. This would come with other issues that you won’t find in new TOP units, such as lease decay, maintenance issues and higher cost to hack and renovate the existing unit.
If you intend to generate rental income, it can be a big plus to have a newer TOP unit, instead of an older resale unit. Tenants might be better attracted to newer condos, with more up-to-date facilities.
(Note: You shouldn’t count on a higher rental yield, as you’re also paying more for a newer condo; but it can mean higher rentability, in that it may be quicker and easier to attract a tenant).
2. There is no risk of construction delays, or failure to complete
These situations are rare in Singapore, but they could happen. For example, in 2019, a developer behind two condos – Laurel Tree and Sycamore Tree – ran out of money to complete both projects.
A more common risk than failure to complete is construction delays. A developer may end up needing more months than expected, and exceed the planned TOP date. This can mean additional costs to home owners who may need temporary accommodation, or a loss of rental income for aspiring landlords.
This is especially a concern at the time of writing, when the Coronavirus outbreak is threatening to disrupt logistics and stall construction.
New TOP units, as well as resale condos, share the advantage of avoiding these risks entirely.
3. Sometimes you can view the actual unit, instead of just seeing a showflat
It’s a common practice to have showflat in the actual development, by the time the TOP is received. This is much better for you as a buyer, as you can get a sense of things that you may not notice in showflats such as noise levels, or the quality of facilities.
4. You have a chance to use a Deferred Payment Scheme (DPS) if the CSC is also issued
The DPS can only be used for developments that have received the Certificate of Statutory Completion (CSC). This usually comes close to the time when it receives the TOP.
DPS is never available for condos that are still under construction.
A typical DPS scheme allows you to pay just 20 per cent upfront first; after that, there’s a deferment period (most commonly 24 months). You only need to come up with the remaining 80 per cent after this period.
This effectively means you can move into the property and not make any repayments for two years. Not only will you save on two years’ worth of interest repayments (on a home loan), you also have more time to settle financing issues.
In some cases, you are also allowed to rent out the condo during the deferment period (check the terms and conditions).
However, be aware that developers tend to increase the overall price if you buy with a DPS scheme. It may not always translate to a savings, even if it’s more convenient. You can contact me directly, if you have questions on how the DPS works.
5. You generally lose the discounts from earlier launch phases / VIP previews.
In most – but not all – cases, the discounts for a new condo are bigger during the early phases of the launch; in particular during the VIP preview. When you buy a new condo unit that has just reached its TOP, you are usually buying at a much more expensive point.
There are some exceptions here; such as if the developer is rushing to clear units before its five-year deadline, or you’re buying a premium unit like a one-of-a-kind penthouse. But in general, you are not buying at the cheapest point, if you wait for a condo to TOP before buying.
Which also leads me to point out that…
6. You may not be left with the choicest units, if you buy this late
Unless the condo’s sales have moved very slowly, latecomers risk being left with unpopular units.
During the early phases of the launch – when the condo is still under construction – buyers are already securing units with the best facing, that are furthest from the road noise, have the best pricing for the given floor plan, etc.
By the time the new condo receives its TOP, it may only be the less popular units that are remaining. You may end up with the ones that are facing the garbage centre, the ones furthest away from the pool and tennis courts, etc.
In light of the above, should you pick a condo that’s under construction, or that’s just reached TOP?
In general, if you’re searching for a value buy, you may be better off looking for a condo that’s still under-construction, or perhaps a resale unit.
With some exceptions, new condos that just received their TOP are not at their cheapest. You’ll be paying for the privilege of having a brand new home, minus the drawback of waiting time.
That said, new TOP condos remain a viable choice if you need to move in immediately, but existing resale units in the area are just not suited to you.
If you’re feeling stuck over this decision, drop me a message on Facebook, and I can help you work through different options. You can also follow me on RonChong.net for updates on Singapore’s real estate market.